Question

Process B had no opening inventory. 13 500 Units of raw materials were transferred in at N$4.50 per unit. Additional material at N$1.25 per unit was added in the process. Labour and overheads were N$6.25 per completed unit and N$2.50 per incomplete unit. If 11 750 completed units were transferred out, what was the closing inventory in Process B? Select one: a. N$12 250.00 b. N$6 562.50 c. N$25 375.00 d. None of all e. N$14 437.50

Cost Accounting: Process Costing question, based the Work in process(WIP) account.

Answer 1

Computation of the closing inventory in Process B is:

Closing inventory in Process B = Closing inventory units * Closing inventory per unit

= 1,750 units * N$8.25

= N$14,437.50

Hence, the closing inventory in Process B is N$14,437.50, that is, the option (e) is correct.

Working Notes:

1.

Computation of the closing inventory units is:

Closing inventory units = Units of raw material transferred - Completed units transferred

= 13,500 - 11,750

= 1,750 units

Hence, the closing inventory units is 1,750 units.

2.

Computation of the closing inventory per unit is:

Closing inventory per unit = Raw material transferred per unit + Additional material per unit + Labour and overheads per incomplete unit

= N$4.50 + N$1.25 + N$2.50

= N$8.25

Hence, the closing inventory per unit is N$8.25.